Women Entrepreneurs Are More Likely to Get Funding If They Emphasize Their Social Mission

Executive Summary

Over the last decade, new ventures across industries have framed their businesses in terms of social impact. A disproportionately high number of these ventures seem to be founded by women. One reason? When female founders emphasize the social mission of their startups, they’re more likely to get funding. A study of 43 ventures found that on average, female-led ventures were perceived as less viable than male-led ventures. However, female-led ventures that more heavily emphasized their social impact managed to avoid this gender penalty. (Male-led ventures were unaffected.) These patterns were the same regardless of whether evaluators were male or female.

jennifer maravillas for hbr

Over the last decade, new ventures across industries have framed their businesses in terms of social impact. We observed that a disproportionately high number of ventures that emphasize social impact seem to be founded by women. This could be because female founders are more likely to care about social issues than men. But we also wondered if something else might be going on: perhaps the women who started social enterprises were more likely to get funding than women who started traditional businesses.

To explore this idea, we carried out two studies. In the first, we partnered with an entrepreneurship incubator that supports businesses with a social mission to study real-life venture evaluations made by potential funders and other supporters. Because all founders had a social mission, they had a choice about whether to emphasize their social impact in presenting their venture. Some devoted more than a quarter of their business plan to the venture’s social impact, while others barely mentioned it at all.

Across 43 ventures and 421 evaluations, we found that on average, female-led ventures were perceived as less viable than male-led ventures. However, female-led ventures that more heavily emphasized their social impact managed to avoid this gender penalty. (Male-led ventures were unaffected.) These patterns were the same regardless of whether evaluators were male or female.

To dig deeper into what was happening, we conducted a second study in the form of an experiment. We developed two entrepreneurial pitches that described a fictional venture. Both discussed the commercial objectives of the business, but only one also emphasized the social mission. Each pitch was recorded in audio format by either a man or a woman, resulting in four versions that were evaluated by a total of 224 MBA students. Consistent with our initial findings, the “commercial only” version was viewed more positively when pitched by the man, whereas evaluations of the “social + commercial” pitch were equally likely to be positive, regardless of whether it was recorded by a man or a woman.

We theorize that this may be due to a link between social impact and the perceived personal warmth of the entrepreneur. Previous research has shown that for women to be perceived as competent, they must be perceived as warm; men don’t need to be seen as warm to be seen as competent. Sure enough, when we asked our subjects to rate the male and female entrepreneurs on warmth, both were perceived as “warmer” when using social impact framing, but crucially, this only translated into a more favorable evaluation of the business for the female entrepreneur.

In some respects, we believe our findings offer good news for female entrepreneurs. Many we’ve talked to have held back from sharing their goals to impart social impact because they fear that they may not be taken as seriously, and that their business would suffer as a result. Our research suggests very much the opposite: Women entrepreneurs with social impact goals may actually benefit from talking about them freely.

On the other hand, this is also somewhat disappointing in that it confirms other recent research showing that women have to conform to gender stereotypes to be perceived as competent. The fact that this is happening is a consequence of persistentgender biases that continue to play an outsized role in venture capitalism. While this research reiterates that women are judged differently than men, the silver lining is that those in the field of social impact can use this to their advantage.

Such framing can also backfire. If it is not authentic, or if over-used, social impact framing might be viewed with skepticism. Social impact framing may help to mitigate the effects of gender-based discrimination in the short-term, but it is unlikely to change the stereotypes that underlie discrimination, and may even reinforce them. To solve the larger issue of gender discrimination, entrepreneurs, investors and others in the entrepreneurship ecosystem will all need to continue confronting some very deeply-held biases.